Can the adjudicator be in repudiatory breach of contract?

If there is a contract between the adjudicator and the parties (and case-law suggests that there is), can you apply all the usual rules of contract, including repudiation, to it? Could this give an aggrieved party a tactical advantage?

The contract between the adjudicator and the parties

There is not much law on the contract between an adjudicator and the parties to an adjudication, but there is the interesting case of Linnett v Halliwells in which we learned that:

“…although adjudication is said to be ‘statutory adjudication’ it is, on analysis, contractual. The adjudication process consists of two agreements. One agreement, the Adjudication Agreement, is that made between the parties to a construction contract either expressly or impliedly by the Scheme under s.108 of the 1996 Act. The second agreement, the Adjudicator’s Agreement, is an agreement which may be made between the Adjudicator and one or both of the parties.”

The Linnet case is about payment – which might be based on a contract or possibly a quantum meruit. But let’s leave the quantum meruit to one side and focus on the contract. There must be either:

an implied term that the adjudicator will conduct the adjudication in accordance with the law – and from case law we know that includes complying with natural justice; or

“The Adjudicator shall exercise such powers with a view of fairness and impartiality, giving each Party a reasonable opportunity, in light of the timetable, of putting his case and dealing with that of his opponent.”

In a previous post, I looked at the position of the adjudicator (from the adjudicator’s point of view) when faced with a potential breach of natural justice inherent in the complexity and size of the dispute. Let’s now look at this from the point of view of the parties…

An old chestnut: new points in a response

A few years ago I was acting on behalf of a responding party. Things were not going well. Suddenly they got worse. The referring party was supposed to put in a submission that was limited to responding to points raised by us. But, in fact, the referring party’s submission raised lots of new points as well (albeit about the same dispute).

Our first thought was that the new points should be removed from the submission, but it was really too late for that: the adjudicator had read it immediately on receipt. So we said that we wanted to respond. There was time for us to do that.

The adjudicator said no. He was going to publish his decision on the basis of the existing material in the adjudication, including the new points. But nothing more from us would be looked at.

The classic strategy here is of course to wait for the decision and then challenge it. We didn’t do that. Instead we wrote to the adjudicator saying that his refusal to allow us to respond to the new material, within the time limits of the adjudication, was a breach of natural justice. We had not been given a reasonable opportunity (or any opportunity) to respond to a significant part of the referring party’s case, despite the fact that there was time to do so. (It is not a breach of natural justice to refuse to consider a late submission.)

The breach was so significant that we said it was an anticipatory repudiatory breach. The adjudicator owed the parties a contractual duty to act in accordance with natural justice and was evincing an intention not to do so. We wrote to the adjudicator accepting the breach and saying that the contract was discharged. The consequence of this was that any decision delivered after our acceptance of his repudiation would be void.

The adjudicator published his decision but it was better (for us) than we thought it was going to be. We settled the dispute for slightly less than the amount awarded and (fortunately or unfortunately depending on your point of view) the repudiation point was not tested.

Statutory and contractual adjudication

We know that a statutory adjudication can become a contractual adjudication. But if the contract is discharged does the adjudication fall away entirely? Or does it continue, probably on the basis that it has reverted to being a statutory adjudication? This point does not seem to have been considered so I would certainly say “don’t try this at home”.

Some might ask what difference it makes. Not complying with natural justice (if sufficiently serious) may well repudiate the adjudicator’s contract but it also renders the decision unenforceable.

So why bother with repudiation?

Two reasons:

It gives you two lines of attack instead of one. Not only can you argue that the decision is unenforceable, you can also argue that it is void following discharge of the adjudicator’s appointment.

There is the question of the adjudicator’s fees. Do the parties still have to pay the fees if the contract is discharged in this way?

The Linnet case considers the fee position where the adjudicator does not have jurisdiction from the start. It does not consider the fee position where the adjudicator has made his decision invalid by a failure to follow natural justice.

But isn’t the adjudicator immune from this sort of attack?

Well maybe, but maybe not. Section 108(4) of the Construction Act 1996 provides that, for an adjudication procedure to be compliant, it has to provide that:

“the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and… any employee or agent of the adjudicator is similarly protected from liability.”

But we are not talking “bad faith” here. We may not even be talking “liability”. If the adjudicator fails to follow the rules of natural justice he may not be liable for the consequences. But on what basis can he claim his fees, if he has not done what he has been asked to do with the result that his efforts have been wasted?

This would be a personal repudiatory breach. We know from the NetTV case that it is quite difficult to escape liability for this kind of breach. I suspect that the answer is that a deliberate failure to follow natural justice will be thought of as akin to bad faith and the adjudicator may well not get his fees.

Don’t try this at home?

However, in the vast majority of cases, a failure to follow the rules of natural justice will be an error of judgement. I think a sort of “reasonable skill and care” test might apply. In other words, the adjudicator does not guarantee compliance with natural justice – he just has to try.

A similar concept as having to answer the right questions, but not necessarily giving the right answer.